NGT buffer-zone order to hurt builders further in Bengaluru

According to builders, property developers will see the project cost going up by around 30% as they will have to redesign projects and also keep paying interest on bank loan.Sobia Khan | ET Bureau | Updated: September 02, 2016, 14:20 IST

BENGALURU: The recent buffer zone prescribed by National Green Tribunal (NGT) is going to further hurt builders financially in Bengaluru, even as the property slowdown continues to impact sales across the country.

According to builders and consultants, property developers will see the project cost going up by around 30% as they will have to redesign projects and also keep paying interest on bank loan. Further, builders will also end up paying government charges for re-approval of their project plans.

The NGT order has put several listed and non-listed builders at the risk of losing large tracts of land.

Most of the builders have either bought land or entered into joint development based on current city development plan and it's by-laws. "We are losing 30% of our land in one our project due to buffer zone directive passed by NGT. There is huge financial implication of the order. A retrospective order will destroy already damaged confidence and the business itself," said Koshy Varghese, managing director at Value Designbuild, a builder.

The order is also expected to push up property prices as builders will be forced to pass on the extra cost to home buyers.

"Everyday the meter is ticking as there are huge costs involved. Many builders would have borrowed money and now they will be forced to pass the extra cost to home buyers," said Kamal Sagar, managing director, Total Environment Building Systems.

In a landmark ruling on May 4, the NGT barred construction activity within 75 metres from the periphery of water bodies, 50m from the edge of primary rajakaluves, 35m from secondary rajakaluves and 25m from tertiary rajakaluves. This has made Karnataka's Environment Im nataka's Environment Impact Assessment Authority put on hold environmental clearance for 10 mega real estate projects in Bengaluru, including large residential projects, for alleged encroachment of lakes and drains.

Sterling, which recently received notice from the authority said, "We do not have any primary, secondary or tertiary rajakaluves in our project site. The State Environment Impact Assessment Authority has not declined clearance but is seeking legal opinion from the government of Karnataka law department," said Kishore K Shetty, senior VP, corporate affairs, Sterling Developers.

"Prices will go up as development has decreased. We may also see 30-40% of lands in Bengaluru becoming undevelopable as there are nalas every 200 metres according to old village maps," said Nesara, BS executive director, Concorde group.

According to Confederation of Real Esta te Developers Association of India, every plan sanction goes through at least 7 to 8 stages of verifications, vetting, inspections from officers from the lowest rung to the highest level and this process in most cases takes around 2 years or more.

"It is important that the government should own up the sanctions given by them. Giving cognisance to and pulling out ancient century-old maps is only creating confusion and panic among home buyers and the general public and exposes the developers to unnecessary stress," said JC Sharma, president of the Bengaluru chapter of Confederation of Real Estate Developers' Associations of India.

Bengaluru, which remains one of the best-performing real estate markets in India, has seen residential sales in the city drop by as much as 30% in the past four quarters due to slow job creation and low salary increases at software companies.This has put financial stress on builders who are borrowing heavily from private equity funds and non-banking financial institutions.

According to LJ Hooker, total inventory in the first half of 2016 in Bengaluru stood at 1,25,738 units.